Defence introduction

For nearly two decades, Australia’s annual budget has been a bit of a ho-hum experience for Defence. It was not quite tick-and-flick, but Defence has had relatively little to fear... Those decades of ho-hum [have come] to a shuddering end.[1]

In a prelude to the release of the 2011–12 Defence Budget, the Minister for Defence, Stephen Smith, announced that increased efficiencies within Defence would result in a reduction of 1000 civilian positions.[2] On release of the Defence Budget, the Minister further announced that Defence would contribute to the Government’s overall surplus targets by reducing ‘its call on the budget by $1.6 billion in 2010–11 and $2.7 billion over the next four years’.[3]

Total funding in the 2011–12 Defence Budget is estimated to be $26 559.8million.[4] From this amount Defence will provide $10 099.5 million to the Defence Materiel Organisation (DMO) for acquisitions and sustainment services in support of the Australian Defence Force (ADF). This makes up the bulk of DMO’s available total net resourcing of $11 745.6 million for 2011–12.[5]

In effect, the total Defence funding estimate for 2011–12 has been reduced by 1.3 per cent when compared to the Defence Portfolio budget statements 2010–11 estimate of $26 896.5 million for 2010–11.[6] Despite the reduction, this is still an improvement on the 2010-11 Budget forward estimate for 2011–12 of $25 867.4 million, which would have reduced Defence funding by 3.8 per cent.[7] The estimated actual Defence funding for 2010–11 is expected to drop to $25 250.1 million.[8]

Due to increased efficiencies, the cancellation of the purchase of two C-130J Hercules and capital investment reprogramming is expected to generate total savings of $2 712.0 million up to 2014–15.[9] Additionally, the efficiency dividend that applies across the Australian Public Service has again been extended from 1 per cent in the 2009–10 Budget to 1.5 per cent in this year’s Budget, but is expected to drop back to 1.25 per cent by 2013–14 and 2014–15.[10] An additional $134.9 million in savings across the forward estimates has been earmarked for return to the Government.[11]

How these fiscal reductions will impact on the Government’s promised 3 per cent average real growth in the Defence Budget to 2017–18 remains to be seen.[12] Some commentators have noted that although the forward estimates indicate a reduction in capital expenditure to 2014–15 followed by a significant increase, Defence industry is anticipated to decline over the downturn period as a result. In effect, ‘the Defence Budget is going to have to rise precipitously’ for it to achieve 3 per cent average real growth for the decade, however, it is likely to be ‘very difficult’ for defence industry to ‘ramp up’ around 2014–15 in response to the Government’s increased demand.[13]